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John rent a flat at $6000 a month. he decides to buy it from the owner. After buying it, he no longer pays rent. Does it mean that now the cost of USING the flat is ZERO?
ANS:As John is the owner of the flat,he is able to lend it to others and get rental income.If he uses the flat himself,the highest valued option forgone is the rental income he gives up.Therefore,the cost of using the flat is not zero.The cost is the potential rental income,$6000 a month.